August 2019 Overview

The month of August was a volatile one for investors, both locally and abroad, as equity markets continued their dance up and down.
The principle drivers of this were a further rise in tensions between the US and China’s Tariff War, complicated by UK Prime Minister Boris Johnson’s determination to ensure the (not so) United Kingdom leaves the EU on the 31st of October, with or without a deal.

The ongoing uncertainty unnerved investors to the point that markets saw near-5% corrections mid-month, rebounding towards the end of the month to finish marginally negative. The Rand and other Emerging Market currencies’ weakness, along with our overall defensive positions, did cushion the performance of the Octagon Funds, avoiding much of the losses experienced in the markets.
 
The expected glide-path of interest rates has settled emotions somewhat, as the scope to reduce rates further supported our local assets. The SARB reduced interest rates by 0.25% in July and is widely anticipated to do so again later this month. Our inflation forecast points to a benign inflation environment, with CPI averaging below the mid-point of the SARB’s target-band of 3% – 6%, creating scope for lower rates locally – a move that would provide much welcome and needed support for our economy.

Earlier this week, Stats SA released South Africa’s GDP figures for the 2nd Quarter of the year, showing a rebound of growth that exceeded expectations. Along with an apparent pause in US/China tariffs and an impasse in any No-Deal Brexit, this set our currency on a path of strength, along with equity markets bouncing up to levels not seen for a number of months.

We hope that the measures and decisions being taken by President Ramaphosa and his team will ensure an alignment of our interests with the rest of the world – we could certainly benefit from an improved sentiment as we head into the last quarter of the calendar year!

For the recent fund fact sheets, click here